Pro Pyme Transparente

The EU market, one of the biggest wooden furniture consumers in the world, is well known for being highly demanding and it requires constant changes in carpentries’

designs (Xuân Lộc, 2014). The competitive advantages of this market are designs and quality rather than price. As a result, besides legal requirements in general, there are

requirements set out by importers and consumers. This part of the study will analyse requirements for export timber and timber products, and also point out some factors which may affect timber export activities.

4.4.1. EU legal requirements for timber exporting activities to the EU market

The most important EU requirements for timber and timber products revolve around legal harvesting.²⁸ In 2010 the European Parliament and Council issued the Regulation (EU) No 995/2010 to apply the obligations of operators who place timber and timber products on the market.²⁹ The Regulation covers a wide range of timber products listed in its Annex using EU Customs Code nomenclature.³⁰ Through this regulation, the EU buyers that place timber or timber products on the market time have to show due diligence and have to trace the products back to the source.

It is also known that the (Illegal) Timber Regulation counters the trade in illegally harvested timber and timber products through three key obligations: the first, it prohibits the placing on the EU market for the first time of illegally harvested timber and products derived from such timber; the second, it requires EU traders who place timber products on the EU market for the first time to exercise 'due diligence'; and the last is require the timber products economic operators in this part of the supply chain have an obligation to keep records of their suppliers and customers.

Once on the market, the timber and timber products may be sold on or transformed before they reach final consumers. To facilitate the traceability of timber products, economic operators in this part of the supply chain (referred to as traders in the regulation) have an obligation to keep records of their suppliers and customers so that if suppliers want to export the timber and timber product into the EU market, they have to provide well-documented guarantees of legality. The EU Timber Regulation (EUTR) is part of the Forest Law Enforcement, Governance and Trade (FLEGT) Action Plan.

28 What requirements should timber products comply with to be allowed on the European market , https://www.cbi.eu/market-information/timber-products/buyer-requirements/, Accessed on 12/11/2015

29 The Regulation entered into application on 3 March 2013.

30ec.europa.eu, http://ec.europa.eu/environment/forests/timber_regulation.htm, Accessed on 12/11/2015

Another part of the plan is the Voluntary Partnership Agreements (VPAs). The FLEGT VPAs are bilateral agreements between the EU and timber exporting countries which aim to guarantee that the wood exported to the EU has a legal source and to support partner countries in improving their own regulation and governance of the sector (Dylan Geraets and Bregt Natens, 2013). The EU has concluded six VPAs with timber exporting countries, and six other VPAs are currently under negotiation.³¹ However, the implementation of the EUTR is still in its infant stage. In many EU member states, the monitoring of trade in illegal timber is still insufficient. At the supply side, at present there are6 growing countries in the final stage of implementing a VPA and 9 other countries are still in the negotiation stage. None of the countries has finalized the VPA-process yet. Compliance is especially common in the North and West EU countries where there is a strong commitment towards legality and sustainability. However, in these regions, (smaller) purchasers can also be less pro-active and not yet fully compliant. What has happened since the implementation of the EUTR is that the supply chain of timber has become more transparent. Exporters also have to pay attention to CITES (international convention on trade in endangered species). With a CITES permit, exporters automatically comply with the requirements of the EU Timber Regulation (EUTR) and their timbers are considered to be legally harvested.

Chemicals in timber: Outdoor timber products are usually applied with preservative such as arsenic, creosotes and mercury to protect them from termites and to enhance their durability. However, EU prohibits timber that has those substance except for some products used for assembling industry and railway sleepers. It also prohibits timber containing certain oils, glue vanishes and lacquers, which can cause toxicity. EU has introduced Regulation (EC) No 1907/2006 of the European Parliament and of the Council of 18 December 2006 concerning the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH).It provides an improved and streamlined legislative

31 Cameroon, the Central African Republic, Ghana, Indonesia, Liberia and the Republic of Congo (Brazzaville) have signed VPAs. The Democratic Republic of Congo, Gabon, Guyana, Honduras, Malaysia and Vietnam are currently negotiating (add Reference)

framework for chemicals in the EU, with the aim of improving protection of human health and the environment and enhancing competitiveness of the chemical industry in Europe.³²

Certifications: Sustainable forest management, Certification by the Forest Stewardship Council (FSC), the Programmer for the Endorsement of Forest Certification (PEFC) are two main certifications. PEFC's Chain of Custody certification is a mechanism for tracking certified material from the forest to the final product to ensure that the wood, wood fibre or non-wood forest produce contained in the product or product line can be traced back to certified forests.³³ At the moment FSC is the most widely used scheme for certification of tropical timber forests. The market share of timber and timber products from sustainable sources is high in the market for non-tropical timber, especially in North and West EU markets. Besides, Fair Trade is now being tested in timber industry. The Fair Trade concept allows community and small forest owners to be compensated for managing their forests in a sustainable manner through an assurance of fair and premium prices.³⁴ FSC/Fairtrade timber is sold with a Fairtrade premium that adds 10% added value to wood bought from the certified smallholder communities. It has to be seen whether there is a market for this.

Corporate responsibility: EU buyers wanted to ensure sustainable supply of timber, demonstrate corporate responsibility and minimize reputational risk to their businesses.

(EUFLEGT,2013, pg. 2). Important issues are respecting indigenous rights, owner’s rights, environmental performance; respecting labour laws and health and safe working conditions. They can ask them to abide to a code of conduct or sign suppliers’

declarations to ensure compliance with applicable local laws and regulations, industry minimum standards, International Labour Organization (ILO) and UN Conventions.

32http://ec.europa.eu/environment/gpp/eu_related_en.htm, Accessed on 12/12/2015

33http://pefc.org/standards/chain-of-custody, Chain of Custody

34 Fair Trade and Timber, http://www.justforests.org/current-campaigns/fair-trade-and-timber , Accessed on 03/02/2016

Eco-label for timber : Eco-labels do not only focus on sustainable sourcing but also on other aspects of the products: processing (e.g. energy consumption, waste management), packaging and use phase (use of preservatives). There are several eco-labels but the most widely recognized label is the EU Eco-label which is available for floor coverings; wood covering and wooden furniture. The number of certified products has grown in recent years but the market is still small. The European Eco-label scheme enables European consumers, including public and private purchasers, to easily identify officially approved green products across the European Union, Norway, Liechtenstein and Iceland.³⁵ Introduced in 1992, the label communicates to customers that the marked products meet specific eco-friendly criteria that have been developed to apply to everyday consumer goods and services.

Quality standards: Timber products used for construction have to satisfy requirements relating to: Durability; Environment protection; Health and hygiene; Safety;

Noise absorption; Energy saving; Heat preservation.³⁶ Technical barriers

Regulations on labeling: EU has adopted legislations to ensure pest control in wood packaging. The marking used for regulated materials is based on the International Plant Protection Convention compliance symbol shown below:

35 The legal base for Eco-label is Regulation (EC) No 66/2010 of the European Parliament and of the Council of 25 November 2009 on the EU Ecolabel.

36 Some example of non-tariff barrier is listed in annex 2

Found in all “New Approach” legislation with a few exceptions, the CE marking demonstrates that a product meets all essential requirements (typically related to safety, health, energy efficiency and/or environmental concerns).

Regulations on packaging: There is also non-product specific legislation on packaging and liability that apply to all goods marketed in the EU. However, the phytosanitary measures still apply in wood product, as shown in the Revision of ISPM No. 15 - Regulation of wood packaging material in international trade.³⁷ From 1 March 2005, the landing requirements apply for wood, wood products and wooden packaging material arriving in the European Community from all countries, except Switzerland. The landing requirement does not apply to wood, wood products and wooden packaging material which is simply moving from one EU member State to another. Additionally there is no phytosanitary certificate requirement for wooden packaging material arriving in the EC, which is ISPM15 compliant as the certification is provided via the ISPM15 wood mark.

Wood packaging material (WPM) will also be affected following EU implementation of ISPM 15 on 1 March. From that date, all WPM, such as boxes, crates, pallets, which are made using any unmanufactured wood products, must meet the new requirements and be either heat treated or fumigated with Methyl bromide under an officially approved programmer and carry the internationally agreed mark. WPM comprises entirely of manufactured wood products such as plywood, particle board, oriented strand board or similar is EXEMPT, and need not to be treated or marked. For WPM manufactured before that date, and until 31 December 2007, the mark only needs to contain the country code, the producer code and the treatment code. After 1 January 2008, all WPM will need to have the full ISPM 15 mark, including the IPPC logo.

Dunnage: From 1 March 2005, and until 31 December 2007, all dunnage must either be bark-free, free of pests and signs of live pests OR be heat treated or fumigated with Methyl bromide and carry the ISPM 15 mark incorporating the country code, the

37www.ispm15.com/ISPM15_Revised_2009.pdf, ISPM 15 Revised 2009. Accessed on 15/11/2015

producer code and the treatment code. For treated and marked dunnage, there is no requirement for the wood to be debarked until 1 March 2006. After 1 January 2008, all dunnage will need to have the full ISPM 15 mark, including the IPPC logo.”³⁸

Emergency measures: In the meantime the emergency measures covering WPM from Canada, China, Japan and the USA will remain in place, pending review. This means coniferous WPM from these countries must be heat treated, chemically pressure impregnated or Methyl bromide fumigated and marked (and from China, only, be accompanied by a phytosanitary certificate). In addition, non-coniferous WPM from China must be either bark-free and free of insect bore holes > 3 mm across OR kiln-dried.

Import documentary: Imported goods must be accompanied by a customs declaration, which has to be submitted in writing, and an invoice in duplicate. The commercial invoice must show the country of purchase and the country of origin of the goods. In addition, a certificate of origin may be required in some cases. Import duties and taxes are subject to change and companies are well advised to verify the correct tariff level shortly before carrying out any export transaction.³⁹

4.4.2. Others requirements from EU importers

Importers in the EU tend to buy products themselves so exporters need to do research on EU purchasers in order to meet their demands (Xuân Lộc, 2014). Besides the above requirements, there are factors that have influence on the exporting activities of timber exporters and depend on internal situations of enterprises such as: ⁴⁰

Reliable: Buyers place reliability above all other considerations. Reliability of supply is crucial to buyers, especially in EU. Reliability is defined as being dependable when it

38www.timcon.org, http://www.timcon.org/ISPM15/ISPM15GlobalGuide.asp#EU

39Trade Regulations. Customs and Standards

http://export.gov/Germany/MarketResearchonGermany/CountryCommercialGuide/TradeRegulationsandStandards/i ndex.asp, Accessed on 12/11/2015

40 Top 10 tips for doing business with European timber buyers, https://www.cbi.eu/market-information/timber-products/doing-business/ accessed on 02/04/2016

comes to delivery times; being able to guarantee a steady quality in the product; being good communicators; and in general being honest and good to do business with. If an exporter can convince buyers that it is a reliable supplier, it will be able to do business in Europe. Exporters should be able to show that they have a good track record for reliability; references should be available; and their company image should be professional. If they are not able to prove reliability, they should come up with other ways such as inviting buyers to their factory for few days.

Image of the enterprises: Buyers like the image boost from a fair-dealing supplier.

The quality of a supplier’s Human Resource Management (HR) and Corporate Social Responsibility (CSR) policy is important to buyers. Buyers need all the positive image builders they can get to keep the balance in the favour. If a supplier has effective HR and CSR policies, a buyer can use these to promote his company to customers in the EU.

Buyers often use their suppliers’ good image to improve their own market position.

“Good” means having effective HR and CSR policies, using sustainable and legal timber, etc. To create a good image in the market, the company website, brochures, house-style, email, footnotes, etc. should all be professional.

Sustainable forestry supply: Buyers will not go against the trend to sustainability.

Exporters who have certification in place and can demonstrate continuing progress on this issue will not find it difficult to enter markets. In the future, companies which are unable to keep up with the market’s demand for sustainability will have no choice but to leave the European and other advanced markets.

Capacity: To buyers, capacity is another word for quality. Buyers are well aware of the fact that a potential suppliers’ capacity in machinery, manpower, raw material and skills is a critical factor in the supplier’s ability to supply goods as promised. Buyers would expect their suppliers being able to have enough of each element of this essential foundation in place before the suppliers start promotions or negotiations related to their products. Therefore, export companies should only approach buyers who match their companies’ capacity and assure importers that they have a steady timber supply.

Complying with the law: Buyers will not accept suppliers who ignore Market Access Requirements (MARs) which are important to buyers. When being asked what the most MARs are, buyers tend to put Forest Law Enforcement, Governance and Trade (FLEGT) and CITES at the top of their list. An exporter complying with the FLEGT can attract attention from many European buyers. If an exporter is not certified, it will not have access to the EU market after March 1^st, 2013.”⁴¹

41www.cbi.eu, https://www.cbi.eu/market-information/timber-products/understanding-european-buyers/, How do European buyers of timber and timber products think?, access on Febuary 5^th, 2016. Accessed on 12/12/2015